Optimism over a US-Iran agreement pressures the USD, while Fed rate hike risks limit downside ahead of the June FOMC meeting.
The US dollar remains under pressure amid rising optimism for a US-Iran deal, with reports of Qatari-mediated progress on frozen Iranian assets and a potential reopening of the Strait of Hormuz. President Trump signaled flexibility on uranium disposal, easing tensions and reducing oil supply risks.
However, Fed Governor Waller’s recent remarks reinforced expectations for a hawkish June FOMC decision, with markets pricing in a reduced likelihood of rate cuts. The BoJ’s inaction on FX intervention and unchanged rates at 0.75% further weigh on the yen, leaving USD/JPY trapped in a tight range.
Traders are balancing near-term USD weakness from geopolitical easing against the risk of a hawkish Fed surprise, particularly if oil prices remain elevated due to prolonged Strait disruptions.